Did payday loans make your finances more difficult or impossible? Those loans may have been “unaffordable” and you should not have been given them. You may be able to claim a refund of the interest you paid.
It’s easy to ask for a refund using the free template letters here. You can use these letters with any payday lender. They work if your loans were repaid on time, or late, or you still owe money to the lender or a debt collector.
If the lender says No , or offers too little, this article also explains how to go to the Financial Ombudsman. It’s easy and many people are getting large payouts.
The comments below have readers’ stories of the payday refunds they have been given and the Ombudsman decisions. It’s a good place to ask questions and get support!
If you have had a lot of expensive borrowing on credit cards or catalogues, also check out Can I get an interest refund from a catalogue or credit card?
What are “unaffordable” loans?
If you could only repay payday loans by borrowing again or from a different lender – your payday loans were probably “unaffordable” and should never have been made.
Here is a regulator’s definition of “affordable”:
“To qualify for a given amount of credit, the borrower should be able to make the required repayments without undue difficulty, whilst continuing to meet other debt repayment obligations and reasonable regular outgoings.”
So for a payday loan to be affordable, you had to be able to repay it the next month and be able to pay your other bills and debts. If any of the following points apply, the payday lender should have realised the loans weren’t affordable and stopped lending you more:
- you often rolled over loans;
- you often borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- you were late making repayments;
- the loan was a significant part of your income and you couldn’t afford it because of your expenses such as rent, bills, transport, food, other debts.
Why does this matter?
If the Financial Ombudsman decides your loans were unaffordable, the lender will have to refund you the interest you paid. And for payday loans, that interest was a lot!
Were you treated unfairly?
If you told the lender you had financial problems the lender should have treated you fairly. read Payday loans: what to expect from your lender if you’re struggling which was written by the FCA, the payday loan regulator. That has lists of what a lender should (and should not!) have done, for example suggesting you roll a loan or borrow more money.If any of these happened to you, add them your complaint.
How much compensation can you get?
This will depend on your case. If the Ombudsman decides your loans were unaffordable, the question is when should the lender have realised this and stopped lending? A typical decision by the Ombudsman is to say the payday lender should refund all interest after the third/fourth/fifth loan. This may be earlier if your loans were “rolled” a lot.
A typical decision by the Ombudsman is to say the payday lender should refund all interest after the third/fourth/fifth loan. This may be earlier if your first loans were rolled or extended a lot.
You aren’t likely to get a “full refund” but ask for the lot and let the Ombudsman decide what is fair. You don’t have calculate anything for your complaint, just ask for:
- a refund of all interest and charges paid plus statutory interest of 8%;
- “unaffordable” loans to be deleted from your credit record.
Wonga and some other lenders have already written off some loans. You may still be able to get compensation if you had earlier loans that you repaid. Again just ask for everything and let the Ombudsman decide. Simple!
If you were treated poorly when you told the lender you were in difficulty, then add something like: “I would like to ask for a refund of interest and charges for all the loans I had. I would also like additional compensation for the way you mishandled my situation when I told you I couldn’t repay a loan.”
So how do you claim compensation? There are three steps:
Step one – get the facts
If you already have a list of your loans and how much you repaid a lender you can skip this and go straight to Step Two. You may be able to see your full history on the lender’s website if you can log in, or you may know from your emails, bank statements or even your credit report. If you can see the full history online, take a copy of it in case it later disappears!
To get details of the loans you had, email the lender’s Complaints team (see this list of email addresses) and say:
Some lenders make this step hard. See What to do if a payday lender won’t sent you a Statement of Account if your lender is trying to charge you for this.
If you don’t get a reply within a few weeks, go on to Step two and put in a full complaint.
Step two – ask for a payday loan refund
Email the lender saying you want to complain because you were given unaffordable loans. This can be a simple letter – just tell your story. You don’t need to mention laws or regulations or supply calculations showing why each loan was unaffordable.
Here is a sample letter you can use. Make sure you change it to tell your story because everyone’s case is different!
Add any other points that help tell your story such as:
- “In August 2013, my hours had been cut at work and I was struggling with my normal expenses.”
- “I took out another loan with xxxx to pay you.”
- “Sometimes I borrowed to pay the rent and then had to top-up to get money for food and petrol.”
- “After I had rolled the loan twice I was so worried about the interest that I repaid it even though this meant not paying my council tax.”
Don’t worry that the lender will say you should have cut back on your living costs – just put down your normal expenses. You don’t need to include evidence, see How much detail should I put in a payday loan complaint?
Some common changes/additions are:
- If you have a current balance owing to the lender, ask for any collection activity to stop whilst your complaint is being investigated.
- If you have a balance that was sold to a debt collector you still complain to the original lender – they were the one that made the mistake of lending to you – but also tell the debt collector that you are disputing the debt.
- If you only had one or two payday loans from this lender remove the bits about borrowing more often from the sample letter. The more loans you had from the same lender the easier it is to make your case because the lender should have spotted the repeat borrowing. But even one loan could have been unaffordable, especially if it was rolled several times.
If one of the debts was sold to a debt collector, you still complain to the original lender, not the debt collector. If you owe money to the debt collector, also send them an email saying that you are disputing the debt with the original lender – this should prevent any court action whilst your complaint is being considered.
Step three – go to the Financial Ombudsman
If the creditor doesn’t offer you any compensation or they don’t reply within eight weeks or they offer you compensation is too low, the next step is to put in a complaint to the Financial Ombudsman.
Should you give up or go to the Ombudsman?
If the lender rejects your complaint or offers you a small amount, don’t be depressed – you may still have a good case, they are just hoping you will go away quietly!
Don’t worry about a lot of the stuff a lender says in a rejection letter, you can still win your case with the Ombudsman. Points to ignore include:
- they relied on what you said on loan applications and you didn’t give the full facts – see lender says I lied for more about this which can sound very threatening;
- you repaid some loans early (so what? this doesn’t prove they were affordable, just that were trying to save interest);
- your borrowing didn’t go up every time (that’s irrelevant – what matters is that you kept borrowing);
- you had a good enough credit score or they didn’t legally have to check your credit record.
If you know how much you paid in interest, this helps you decide if an offer is reasonable or not. Some lenders offer a few hundred pounds to cases which eventually get ten times as much or more from the Ombudsman! People have had large payouts after a complete rejection!
It’s important you get this right. If you are offered a refund on a few loans, don’t accept if you think you paid a lot more than that it interest. Accepting an offer settles your whole complaint – you can’t change your mind later.
If you aren’t sure, you could ask in the comments below. Or put in a complaint to the Ombudsman and let them decide.
We have never seen a case where the Ombudsman offers nothing or less than what a lender offered, so don’t worry that you will “lose” this lender’s offer.
How the FO works
The Financial Ombudsman has a two stage process. The first level is a FO member of staff called an Adjudicator. The Adjudicator will come to a decision, but unless both sides accept it, the case goes to the second stage where it is considered by an Ombudsman. Most complaints are settled at Adjudicator level – there are 10 times as many Adjudicators as Ombudsmen.
How to send your complaint to the FO
Putting in a complaint to the Financial Ombudsman is easy. In 2017, Caroline Wayman, the Chief Ombudsman, has said this about these sorts of affordability complaints:
It’s really OK to phone up and say, ‘I don’t think it was fair.” It’s not court; you don’t have to turn up with your ‘heads of claim’, you don’t have to write a fancy letter. Tell us your story and we will do the rest.
One reader said, “They couldn’t be any nicer.” See their website which explains the different ways you can Complain to the Ombudsman. I like the “do it online” option – that takes you through the complaint step by step and lets you attach other information, such as the reply you have had from the lender.
If you complained to the lender online, you can copy out information from the complaint that went to the lender. You could add some more details, for example if you disagree with what the lender replied to you. You can attach a list of your loans. If you don’t the Ombudsman can get it from the lender.
If some loans are more than six years old, add a bit explaining why you are complaining now, not years ago. Most people knew they were in financial trouble when they were borrowing but had no idea what an irresponsible lending complaint was at that time. So just explain this and say how and when you found out that an affordability complaint was possible (a friend sent me a link about this, I saw someone mention it on Facebook, whatever.)
Put in a separate complaint about each lender. You don’t have to wait and send them all together. In the later ones, just add in a sentence such as “I have already put in a complaint to the FO about xxxx on dd/mm”.
The Ombudsman may ask to see some bank statements and your current credit report. If you don’t have your old bank statements, ask the Ombudsman, as they may be able to get them for free.
A few problem cases
- Don’t try to get a refund if you are bankrupt now or have been bankrupt in the past – any refund will go to the Official Receiver, not you.
- It’s not worth bothering if you are in an IVA as refunds will go to your IVA firm not to you.
- Don’t apply if you are in a DRO, getting a refund may mean your DRO is cancelled!
- You can’t go to the Ombudsman with non-UK authorised lenders – the main ones were Swift Sterling and Pounds Till Payday, see that article for your options.
Need some help?
If you need help to complain, go to your local Citizens Advice, they will help for free.
You don’t need a solicitor or a claims management company. They are expensive and you can make a better claim on your own than they can. A good claim involves telling your own story, not sending a standard letter!
Do check out the Comments below – you could ask a question there. Reading other people’s experiences can be very helpful. The comments are split into pages – use the “older comments” and “newer comments” buttons at the bottom to read them all.
Payday lenders’ email addresses for complaints
If you have an outstanding balance Will the lender write it off?
Ombudsman says can consider complaints about loans over 6 years old
ARTICLES ON INDIVIDUAL LENDERS
Wonga – Quick Quid (& Pounds To Pocket) – Payday UK (& Payday Express & The Money Shop)